Question
Topeka Corporation uses special strapping equipment in its packaging business. The equipment was purchased at the beginning of 2010 for $800,000 and had an estimated
Topeka Corporation uses special strapping equipment in its packaging business. The equipment was purchased at the beginning of 2010 for $800,000 and had an estimated useful life of 8 years with no salvage value. Topeka uses the straight-line depreciation method.
At the end of 2010, new technology was introduced that would accelerate the obsolescence of the equipment. Topekas controller gathered the following information:
Expected future cash flows | $710,000 |
Value in use | $675,000 |
Fair value | $670,000 |
Selling costs | $20,000 |
14. Assume Topeka will continue to use the equipment and that it tests the asset for impairment under IFRS. Based on this test, which of the following statements is MOST correct?
There is no impairment. | ||
There is an impairment loss in the amount of $25,000 |
There is an impairment loss in the amount of $35,000 |
15. Assume Topeka will continue to use the equipment and that it tests the asset for impairment under GAAP. Based on this test, which of the following statements is MOST correct?
There is no impairment. | ||
There is an impairment loss in the amount of $25,000 |
There is an impairment loss in the amount of $35,000 |
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